Reliance Industries’ (RIL) net profit for 2000-01 was up 10 per cent at Rs 2646 crore, its highest ever, but the
company said it had to struggle in the last three months of the year with a fourth-quarter net profit of Rs 540 crore, down from Rs 654 crore in the same period of 1999-2000.

It blamed low product prices relative to input costs and increased depreciation charges for the decline in profit, the first time it has happened in 43 quarters. What has given investors more to worry about is the 2 per cent fall in sales at Rs 6,444 crore against
Rs 6,594 crore in the year-ago period.

Full-year sales increased 38 per cent at Rs 28,008 crore from Rs 20,301 crore in 1999-2000. Manufactured exports, including those in the deemed category, more than doubled to Rs 2,960 crore. Combined with Reliance Petroleum (RPL), of which Reliance holds 64 per cent, the group sold products worth Rs 9,370 crore abroad, making it the country’s largest exporter.

The board has recommended a dividend of 42.5 per cent against 40 per cent last year. Investors, disappointed at the performance, sent the Reliance share tumbling to Rs 343 after it opened at Rs 350 on the BSE. RPL finished at Rs 50.60 after opening at the same level and peaking at Rs 51.85.

RIL managing director Anil Ambani told a board meeting that his company had to pay more for crude and naphtha, the two main inputs, even as the prices at which it sold products flagged. Destocking of inventories, depreciation in the value of regional currencies and the massive earthquake in Gujarat also threw up problems it had not bargained for.

He said fourth-quarter profits were depressed by higher depreciation charges, which shot up to Rs 1565 crore (Rs 1278 crore) due to a change in the way the amount is set aside. He claimed that this also deflated full-year profit by Rs 163 crore.

Reliance Petroleum’s net profit shot up to Rs 1464 crore in 2000-01 and Rs 297 crore in the last quarter. It notched up record sales of Rs 30,963 crore for the full year and Rs 7506 crore in the three months to March.

Reliance may divest around 13 per cent of its equity in the company to Kuwait Petroleum, and increase its investment in Reliance Infocom to Rs 25,000 crore over the next three to five years.

“RIL does not rule out any names and was open to any strategic or foreign investment,” Ambani said.

Meanwhile, Ambani said RIL has kept its options open on buying a controlling stake in the Enron-promoted Dabhol Power Company if the US energy giant pulls out of the project.

Buyback price

Reliance said it will not change the buyback price of Rs 303 per share, dashing hopes of many in the market who expected the threshold to be lowered to Rs 350. There are fears the share could be under pressure in the next few days.

Ambani said no shares had been bought back in the days when the price dropped below Rs 303 per share. He claimed the stock had dipped below the buyback price only on 11 of the 2764 days since the Rs 1,100-crore plan was announced.

Honour for Mukesh

Mukesh D Ambani, winner of Ernst & Young’s entrepreneur of the year award for 2000, will represent India at the first Ernst & Young world entrepreneur of the year award function at Monte Carlo, Monaco, next month.

TATA STEEL EMBARKS ON MEGA RESTRUCTURING

BY PALLAB BHATTACHARYA

Calcutta, April 30:

The Tata Iron and Steel Company (Tisco), the oldest steel maker in the subcontinent, is all set to implement its mega restructuring plan tomorrow. This will be the most sweeping restructuring of the 94-year-old steel monolith since it was founded by JN Tata back in 1907.

The restructuring will give birth to three fully autonomous strategic business units (SBUs) to be headed by three deputy managing directors. While T. Mukherjee will head the steel unit, F.A. Vandrevala will oversee new and allied businesses and Arun Narayan Singh will be in charge of corporate services.

The DMDs will report to the managing director (designate) B. Muthuraman.

Until now, the Tisco management consisted of seven vice presidents under one managing director.

With the formation of SBUs, the functional responsibilities will primarily lie with the three deputy managing directors who will have independent charge.

“We have taken a long time to prepare for the restructuring. And now we are ready to implement it,” said a top Tata official.

He said the company had taken into consideration a very long-term perspective to put in place the much talked about restructuring programme which was prepared by consulting giant McKinsey three years ago.

“This will give birth not only to a much leaner organisational setup but also foster healthy competition among ourselves. The focus on the respective units will also be much greater,” the official said.

The steel division, headed by the current vice president (operations) Mukherjee, will concentrate on the steel making process as well as the raw material supply chain including the collieries.

The new & allied businesses under Vandrevala will look after the production and sales of tubes, bearings and secondary steel as well as exports.

Vandrevala, who is currently the vice president (marketing and sales), has adequate experience and contacts both in India and abroad.

The corporate services arm, which has been formed as a separate entity, will take the charge of corporate communications, town and medical services, social services and information technology.

Since the Tisco plant at Jamshedpur has worn a completely new look after the modernisation and the setting up of cold roll mill, information technology has assumed greater significance.

The official said the level-V modernisation is completely based on information technology which will be the main guiding force behind the steel-making process. “Hence, it was felt that it should be treated as a separate SBU,” the official said.

There will also be two vice presidents — one for corporate affairs and the other for finance. Nirup Mohanty will be vice president (designate) for corporate affairs while R.C. Nandrajog will remain vice president for finance.

The official said the first task before the management after restructuring will be a serious assessment of cost analysis particularly in the era globalisation.

Manpower reduction is one of the key area to reduce cost. The company has already reduced its manpower from 75,000 to 48,000 over the last four years and the figure will be pruned further.

“What is important is that until now, the reduction was effected more at the worker level, but now the impact will be felt at the executive level as well,” he said.

The official said 160 executives had already left and more would leave by October.

During the nine-month period ended December 31, 2000, Tata Steel reported a net profit of Rs 344 crore on net sales of Rs 5405.94 crore. It sold 2.41 million tonnes of steel during the period, up 6 per cent from 2.26 million tonnes in the year-ago period. Saleable steel production rose 11 per cent to 2.63 million tonnes from the level of 2.37 million tonnes in April-December 1999.

CESC LOSS IN LAST QUARTER MOUNTS TO RS 34 CRORE

BY A STAFF REPORTER

Calcutta, April 30:

CESC, the R P Goenka-controlled power utility, has suffered a Rs 98 crore loss for the year 2000-2001 according to the unaudited financial results released by the company today.

For the quarter ending March 31, 2001 the company has registered a loss of Rs 34 crore which is a 100 per cent increase on the loss of Rs 17 crore registered in the corresponding previous quarter.

In the last financial year, net sales of the company increased merely by 6.86 per cent to Rs 1,821 crore as against Rs 1,704 crore in the previous year.

The power purchase bill of the company has decreased from Rs 347 crore in 1999-2000 to Rs 281 crore in 2000-2001. The interest payout of the company was also marginally down by 2.85 per cent from Rs 385 crore to Rs 374 crore.

The interest for 2000-01 is net of certain adjustments for the previous years. The depreciation charges has increased to Rs 306 crore from Rs 198 crore in the previous year. A company official said that the depreciation charge includes impact of Unit II of Budge Budge power station.

Due to the surge in coal prices last fiscal, the fuel cost increased substantially to Rs 576 crore from Rs 488 crore in the previous year.

The auditors’ report on the audited accounts for 1999-2000 included reference to some unbilled fuel surcharge dues and unprovided claims of the WBSEB for delayed payment surcharge and certain other charges.

“CESC has followed the same basis of accounting in respect of these matters while preparing this year’s unaudited financial report,” a company official said.

ACC BACK IN THE BLACK WITH RS 47CR PROFIT

FROM OUR CORRESPONDENT

Mumbai, April 30:

ACC has bounced into the black with a
Rs 47.48-crore profit in 2000-01 against the loss of Rs 58.85 crore in the previous year, the turnaround triggered by a cost-cutting drive under the new leadership of Gujarat Ambuja.

Buoyed by impressive results, the board has recommended a higher dividend of Rs 2 per share worth Rs 37.62 crore. Total income shot past the Rs 3,000-crore mark to Rs 3031.76 crore, an increase of 10 per cent over Rs 2760.42 crore in 1999-2000. Operating profit (before interest, depreciation and exceptional items) increased to Rs 405.59 crore compared with Rs 227.43 crore, registering an increase of 78 per cent over the previous year.

The scrip closed 11.53 per cent higher at Rs 150.45 on the Bombay Stock Exchange, a shade below the day’s peak of Rs 151 as investors applauded the recovery against the backdrop of flagging demand.

The company attributed the performance to cost savings and improved sales realisation. It said the increase in input costs of were offset by improvements in operational efficiency.

The cost of power, for instance, was down Rs 42 crore, fuel Rs 7 crore and manpower Rs 14 crore — largely due to the reduction of over 4,000 employees over the past three years. Depreciation jumped to Rs 141.28 crore from Rs 124.51 crore last year.

The company commissioned the Chanda and Madukarrai units among a bunch of projects. The impact of 25 MW power plants at Jamul and Kymore commissioned in November 1999 were also felt on the firm’s finances.

The commissioning of the new Wadi plant has taken ACC’s installed capacity to 15.3 million tonnes, the highest in the industry.

Sales volumes, including traded cement, were up 3 per cent. The production of clinker was higher at 8.21 million tonnes, while cement output was 10.21 million tonnes, up 2 per cent compared with 10.04 million tonnes in the previous year.

MCKINSEY TO ADVISE SAREGAMA ON EXPANSION

BY A STAFF REPORTER

Calcutta, April 30:

Saregama India (formerly Gramophone India) has asked McKinsey and Co to advise it on ways to expand the music business and its planned foray into television software and film production.

The company has inducted three new directors — former ITC chairman Jagdish Sapru, former State Bank of India chairman Dipankar Basu and UTI executive director B.S. Pandit.

The international consultant will start work in mid-June on a study that will be completed in 8 to 10 weeks, Saregama managing director Abhik Mitra told a press conference here today.

“We will take a month to enter the new businesses after McKinsey submits its report,” Mitra said.

The company announced a pre-tax profit of Rs 16.70 crore for 2000-01 compared with Rs 7.27 crore in the previous year in its unaudited financial results released today. Revenues stood at Rs 177 crore, up from Rs 146 crore a year ago.

The company spent Rs 9.57 crore on a voluntary retirement scheme (VRS) it implemented as part of a business recast plan. The amount has been fully written off during the financial year. The early-retirement plan had been financed by the sale of long-term investments in mutual fund units.

PITSTOP ON THE HIGHWAY

FROM M RAJENDRAN

New Delhi, April 30:

For all those chicken-hearted drivers who have shied away from hitting the highway because of the fear of a breakdown, there’s hope for you yet.

Maruti Udyog, the country’s largest automaker, is planning to put together a chain of authorised service stations along eight major highways of the country during 2001-02.

It’s an attempt to enable drivers who are spooked by the fear of being left high and dry on the highway to become more adventurous.

Maruti car owners travelling on these highways will have the facility of a fully-equipped service station and workshop every 25-30 kilometres along the route. “Car owners are anxious about service and support facilities on highways. This is a move designed to reassure and delight the Maruti customer,’’ said a senior company executive.

Maruti had drawn up a programme of providing authorised service stations and workshop facilities last year and covered 12 major highways in 2000-01. “The learning from the experience last year will be used in expanding the programme now. The highway service initiative is a new benchmark for quality service for car customers in the country. We hope this will eventually become the industry standard,” sources said.

The workshops will be monitored regularly by Maruti’s service engineers and regional representatives as well as the network section at the company. The company will help the service stations and workshops finalise layout, procure tools and equipment and train its manpower. It will ensure that these workshops operate as per company standards.

Initially, these service stations will work from about 9 am to 9 pm and may eventually function for 24 hours depending on the response.

If the scheme picks up, the company is planning to extend the Maruti -Citibank credit card for payment of repairs at these service stations.

Maruti was rated number one in customer service by J.D. Power in its customer survey for 2000.

Industry observers say, “This is a good move. It will help Maruti, which has a 60 per cent of the market share, to retain its leadership in the passenger car market. Other car manufacturers will follow suit. If they don’t, their customers will push them.”

VSNL NET PROFIT SPURTS 88%

OUR BUREAUX

April 30:

Videsh Sanchar Nigam Ltd (VSNL) has recorded a 87.74 per cent rise in net profit at Rs 1,577.6 crore for the financial year ended March 31, 2001, compared to Rs 840.3 crore in corresponding period of previous fiscal. The turnover during the year rose by 7.54 per cent to Rs 7,876.5 crore against Rs 7,323.7 crore last year. The company handled 2694 million minutes of international telephony traffic during the year while internet subscriber base grew from 3.66 lakh to 6.30 lakh.

“ VSNL has started looking beyond its role as the government licensed sole provider of international telephony. VSNL has long term plans to add value to the investors, who have reposed faith in the company. It also has the inherent strengths born out of strong cash reserves, to invest in many of its projects, without having to borrow from the market,” S.K. Gupta , chairman cum managing director said.

Commenting on the financial results, Gupta said the growth in physical performance has been translated into excellent financial performance and the net profit of VSNL for the year.

EGM in Mumbai on Wednesday

The VSNL board has called an extraordinary general meeting at Mumbai on Wednesday to discuss the compensation package offered by the government in lieu of its advanced demonopolisation.

The government has offered to provide licence to VSNL for national long distance telephony. The government has also agreed to pay VSNL a sum equal to the amount paid by it as entry fee and licence fee for a period of five years commencing from April 1, 2001 net of taxes.

VSNL will also be granted category ‘A’ internet service providers licence which will enable it to provide internet access all over the country.

The government can also consider additional compensation if found to be necessary on a detailed review when undertaken.

At present, the government holds 52.97 per cent equity of VSNL with 30 per cent equity represented by depository receipts issued abroad, listed on
the New York Stock exchange. The balance equity
is held by general public, FIIs and companies.The scrip is trade on the major stock exchanges of the country.

KHAITANS HOPE TO BUY OUT MAGOR STAKE THIS YEAR

BY A STAFF REPORTER

Calcutta, April 30:

The Khaitans expect to acquire the 27 per cent stake that the Magors hold in Williamson Magor in the current financial year. It will shortly apply to Reserve Bank of India and Securities and Exchange Board of India for the necessary approvals and get the shares valued by a consultant.

“We will find a way to acquire the shares. We are discussing whether to make an open offer or to take another route, but nothing has been finalised yet,” company director and the youngest son of B.M. Khaitan, Aditya Khaitan, said.

Sebi norms require the company to make an open offer for buying the stake. The Khaitans will, however, retain the 9 per cent they hold in George Williamson (Assam) since 1976-77.

According to a release issued by Williamson Magor, the division of assets at Calcutta and plantations, including manpower, has been worked out to the mutual satisfaction of families. The only business that the Magors and the Khaitans have agreed to run together is the Assam Valley School, a prestigious public school which had been set up by the two families.

George Williamson will own and run the sprawl of 17 Assam gardens which produce 19.50 million kgs of tea every year. The Khaitans will control gardens under the fold of Bishnauth Tea Company and McLeod Russel — both companies are now part of Eveready Industries India Limited — with an annual production of 35 million kgs. The Khaitans intend to run their tea business under the Williamson Tea Company once it is demerged from Eveready. The ‘Williamson Tea’ logo is their registered property.

“Whether the logo will feature the elephant is yet to be decided. In any case, logos are not important in tea, a business where pricing is closely tied to gardens,” Aditya Khaitan said.

R.B. Magor and B.M. Khaitan had established Williamson Magor, a brand synonymous with quality tea for decades. Khaitan made it clear they had parted ways with Magor in an amicable manner.

The company release said the two families decided to separate to ensure that the partnership did not run into problems.

GRASIM NET JUMPS 62% TO RS 378 CRORE

OUR BUREAUX

April 30:

Grasim Industries, the Aditya Birla group’s flagship company, has posted a 62.11 per cent rise in net profit at Rs 377.9 crore during the last financial year compared with Rs 233.1 crore in the previous year.

Net sales during the year was up 12.89 per cent to Rs 4,839.8 crore against Rs 4,289.7 crore in the previous year.

The Grasim board has recommended a higher dividend of 80 per cent as against 70 per cent in the previous year. The payout towards dividend would aggregate Rs 73.34 crore.

During the fourth quarter ending March 31, Grasim posted a net profit of Rs 144.96 crore compared with Rs 47.71 crore in the corresponding period previous fiscal.

The capacity utilisation at the cement plants during the year was 100 per cent. Sales volumes at 9.16 million metric tonnes were higher by 8.79 per cent over that of the previous year.

Ranbaxy Q1 net up

Ranbaxy Laboratories reported a 46.8 per cent rise in first-quarter net profit, boosted by licensing income but well below analysts’ expectations due to rising costs and sluggish domestic sales.

Net profit rose to Rs 57.4 crore from Rs 39.1 crore in the same period a year earlier. Net sales rose 18.7 per cent to Rs 446 crore from Rs 376 crore a year ago.

Domestic sales for the quarter rose just 9.14 per cent to Rs 218 crore, while exports surged 29.5 per cent to Rs 227, the company said.

Ranbaxy Laboratories today also announced that it would be launching drugs to control diabetes,cardio-vascular and gastro-digestive diseases in the last quarter of 2001.

Spurt in Century net

Century Textiles and Industries Ltd’s net profit has jumped 56.28 per cent to Rs 53.95 crore in the last fiscal compared with Rs 34.52 crore in the previous year.

The total income of the company stood at Rs 2,358.99 crore compared with Rs 2,196.09 crore in
the previous year, the notice added.

Global Trust net dips

Its bottomline was squeezed by mounting non-performing assets (NPAs), which shot up to Rs 238 crore from Rs 153.82 crore. The bank said not all the increase in bad loans came from stock market investments which went sour.

In percentage terms, NPAs shot up 0.87 per cent in the last quarter of the year to 3.75 per cent of its total advances. “The NPAs have not piled up because of loans to the capital market. Some of it has come from agriculture (floriculture), distillery and jewellery sectors too,” executive director Sridhar Subashri said.

Chairman and managing director R.S. Hugar said Rs 129.82 crore has been set aside against NPAs, including an adhoc provision of Rs 50 crore. Operating profit stood at Rs 200.77 crore, down from Rs 248.03 crore of previous year.

The bank blamed lower interest income on investments made in government securities under statutory liquidity norms for the profit slide.

Subashri put liabilities at Rs 550 crore, but did not say how much of it was because of the capital market, where it had invested Rs 375 crore. It lent Rs 410 crore to jewellery and distillery sectors, apart from Rs 400 crore to agriculture.